What is an example of the multiplier effect in large cities?

The multiplier effect refers to the economic phenomenon where an initial increase in spending leads to an even greater increase in national income and consumption. In the context of large cities, the presence of a specialized industry can significantly exemplify this effect.

When a specialized industry is established in a metropolitan area, it not only provides jobs directly but also stimulates the local economy in various ways. For instance, the presence of a specialized manufacturing plant might create a demand for raw materials from nearby suppliers, increasing local business revenues. Additionally, employees of the plant contribute to job creation in related services, such as restaurants, retail, and housing, further boosting economic activity. This interconnectedness within the industry and the community amplifies the initial impact of investment and spending, illustrating the multiplier effect.

The other options do not capture this economic principle. High unemployment rates generally indicate a lack of economic activity rather than an increase, which would not lead to a multiplier effect. A decline in public transportation can hinder economic growth by making it more difficult for workers to access jobs, leading to a negative impact rather than the positive growth associated with the multiplier effect. Increase in population density may suggest growth but does not inherently create a multiplier effect unless accompanied by economic development, such as an influx of specialized industries.